China: Terracotta soldiers, soccer and Volkswagen

At a panel exploring issues when doing business with China, David ChenMicrosoft VP and general manager of legal and corporate affairs for the Great China Region, said:

“Don’t go there [China] for cheap labor, for cheap material, or for less strict environment standards. Those days are gone. Go there for the market. Find your competitive advantage. Then you need tenacity and perseverance.”

“Tenacity and perseverance” are crucial in China. It would be wrong simply to label China as only a long-term thinking culture. China is too complex for that representation. Some of this mischaracterization of China comes from a statement made by the first Premier of the People’s Republic of China. During the visit of Richard Nixon to Beijing in 1972, Zhou Enlai, was asked what he thought about the impact of the French Revolution. “Too early to say,” he replied. This has been taken to be an indication of China’s very long view on history. What Zhou Enlai was referring to was not the Revolution of 1789, but the riots in Paris in 1968. A diplomat who was present at the meeting said that it was a misunderstanding “too delicious to invite correction.”

Despite that misinterpretation, China’s perspective on time tends to be longer-term than in the West. A company in the West may project its planning out 5 years. In Asia, in general, the period is typically 10-15 years. When in Japan, a Japanese client told me of 100 year mortgages that were passed down to the next generation.

Three examples from China of longer-term thinking:

1 The Terracotta Army

You have probably heard of the Terracotta Army – a collection of soldier-and-horse funerary sculptures depicting the armies of Qin Shi Huang the first Emperor of China. The army was buried with the Emperor in 210-209 BCE. The army was discovered by accident in 1974 at Xian when local farmers digging a well uncovered a pit containing 6000 life-size terracotta figures. There are many more figures that have not yet been excavated. Why wait? When the figures were sculptured, they were colored with plant dyes which will lose their color when exposed to air for 2-3 days. The Chinese want to preserve the original colors and are waiting for the technology to be invented that will allow this to happen. That could be a considerable time into the future.

2 Chinese Soccer

What about soccer? Xi Jinping, the current Chinese President, has a vision of national resurgence he calls the Chinese Dream – to transform China into a great and confident power. Xi has been a passionate soccer fan since his childhood, and part of his vision is to turn China into a world leader in the global game of soccer by 2050. As part of this process, Xi wants the national team to be one of Asia’s top teams by 2030. He has a blueprint to get 50 million children and adults playing soccer by the end of this decade. He also wants 20,000 training centers and 70,000 pitches in place by 2020. Xi’s term has President will end in 2022, and so he is looking way beyond his tenure.

3 Volkswagen

And what about Volkswagen (VW)? VW was one of the first Western success stories in penetrating the Chinese market, and despite the recent ‘Dieselgate’ scandal continues to battle with GM for number one or two automaker spot in China.

Negotiations with China

Heinz Bendlin, one of the early negotiators with China says, “I learned in China that foreigners tend to have a typical mode of behavior. They want to achieve results quickly, get answers to all their queries, and immediately come up with solutions to problems. But in China be prepared to spend considerable time solving problems step by step, or ibu ibu, as the Chinese say. Setting deadlines or showing impatience leads to disadvantages in negotiations.” Impatience often leads a Western company to make concessions too early in the negotiating process.

Looking back on its successful negotiating style with the Chinese, VW suggests seven points as the keys to its success. They are still very appropriate and worth listing here:

Have a small team and don’t change the team members (long-term relationships are important).

Show up as a team (not as individuals).

Remain patient and never negotiate under pressure or deadline.

Explain facts and figures and your ideas as often as you are asked to do so.

Convince your partners through facts and figures that yours is the best offer (not vague ‘sales talk’).

Do not become nervous when the Chinese use the mass media to influence their position in negotiations.

Do not seek quick results, since they could be bad results – especially in China.